Bell v. Mendenhall

• Decision Date: 26 January 1898
• Docket Number: 10,826 - (237)
• Citation: 73 N.W. 1086,71 Minn. 331
• Parties: DAVID C. BELL [1] v. ABBY G. MENDENHALL and Others
• Court: Minnesota Supreme Court

73 N.W. 1086

71 Minn. 331

DAVID C. BELL ^[1] v. ABBY G. MENDENHALL and Others

Nos. 10,826 - (237)

Supreme Court of Minnesota

January 26, 1898

Appeal by defendant Minneapolis Trust Company from an order of the district court for Hennepin county, Jamison, J., overruling its demurrer to the complaint. Affirmed.

SYLLABUS

Conveyance of Real Estate to Pay Grantor's Debts -- Covenant by Grantee to Pay -- Enforcement by Creditors of Grantor -- Principal and Surety -- Extension of Time -- Release of Promisor.

A covenant on the part of the defendant trust company, in consideration of the conveyance to it by its co-defendants of certain real estate, that it would pay all of their debts not exceeding in the aggregate $130,000, construed, and held (a) That the trust company, as between it and the debtors, thereby became the principal debtor, and obligated itself to pay all of their creditors in full, if the aggregate amount of the debts did not exceed $130,000, but, if it did, then to pay all the creditors on their claims pro rata the sum limited. (b) That the creditors can maintain an action against the trust company on its promise so to pay their claims, but, inasmuch as the amount to be paid is limited, and the amount of the debts uncertain, the trust company is entitled to have any action brought on the promise by a creditor brought for the benefit of all of the creditors, so that all will be bound by the adjudication therein. (c) Neither the fact that a creditor gave to the original debtors an extension of the time in which they were to pay his debt, nor the fact that he recovered judgment, which is unsatisfied, against them for the amount thereof, constitutes any defense to an action on the promise by the trust company to pay the debt.

Defect of Parties Waived Unless Objection Taken -- Demurrer.

A defect of parties to an action is waived, unless objection is taken by demurrer or answer; and, where a complaint states facts constituting a cause of action, but shows that there is a defect of parties, a demurrer to the effect that the complaint does not state facts constituting a cause of action must be overruled.

W. E. Dodge, for appellant.

Harlan P. Roberts and Victor J. Welch, for respondent.

OPINION

START, C.J.

Appeal by the trust company from an order overruling its demurrer to the complaint, on the sole ground that it does not state facts sufficient to constitute a cause of action.

The here material allegations of the complaint are: That the plaintiff is the receiver of the City Bank, a corporation duly organized, and that the defendant trust company is, and has been for the past five years, a corporation duly organized under the laws of the state of Minnesota. That the City Bank loaned $4,000 to J. H. James and the defendants J. R. and Abby G. Mendenhall on January 1, 1893, and received a promissory note, due in 90 days, for that sum, payable to its order, made by James, upon the back of which the Mendenhalls severally indorsed their respective names before the delivery of the note, for the purpose of giving its additional credit. That this note was renewed from time to time up to January 13, 1896, when a new note was given for $4,000, due in three months, payable to the order of the City Bank, signed by James, and indorsed severally by the Mendenhalls. That on August 5, 1896, the bank recovered judgment upon this last note against the Mendenhalls for $4,021.90, and execution has been returned wholly unsatisfied. That this last note and judgment thereon represent the same indebtedness as the first-named note, no part of which has been paid. That, when this first-described note was made, the Mendenhalls were the owners of a large amount of property in this state free and clear from any incumbrance, and thereafter, and on May 1, 1893, they entered into an agreement with the defendant trust company, a true copy of which is annexed to the complaint, and made a part thereof, wherein the trust company is named as the party of the first part, and the Mendenhalls parties of the second part.

This contract contained the following recitals:

"Whereas, said parties of the second part are the owners of certain real estate hereinafter described, subject to certain mortgages, and, in addition to the indebtedness represented by said mortgages, are indebted to sundry parties in the aggregate sum of one hundred thirty thousand ($130,000.00) dollars, more or less; and whereas, said second parties propose to convey said real estate by good and sufficient deed or deeds to said trust company, in order to enable it to manage said property, and assume full control of same, such conveyances being further intended to secure said first party in the payment of moneys, as hereinafter provided: now, therefore, this agreement witnesseth," etc.

In consideration of the premises and the mutual covenants contained in the agreement, the parties mutually agreed, among other matters, as follows:

"(1) It is hereby mutually agreed that the title to said property shall be held by the said first party for the use and benefit of the second parties, their heirs, executors or administrators, subject to the conditions hereinafter named, which conditions are hereby expressly accepted and consented to by all the parties hereto. (2) Upon the making, executing and delivery by said second parties to said first party of deeds to all of said real estate hereinafter described, the said first party shall, within reasonable time thereafter, or as soon as, under the circumstances, shall be required, (a) pay all of the outstanding indebtedness of said second parties; such payment not to exceed in the aggregate, the sum of one hundred and thirty thousand ($130,000.00) dollars."

The contract also provided for the payment by the trust company of all necessary sums for the care and preservation of the property, and for taxes and interest on the mortgages on the property, and $4,000 a year to the Mendenhalls. It was to receive $1,800 a year for its services, and interest at 7 per cent. per annum for all money so to be paid by it. There were no personal covenants by the Mendenhalls to repay any part of this money so to be paid by the trust company, but it was authorized to sell the real estate, and reimburse itself from the proceeds of the sale.

The complaint further alleged that the Mendenhalls, at the time of the execution of this agreement, and pursuant thereto, duly conveyed by warranty deed to the trust company the real estate in the agreement described, and duly performed on their part all of the terms thereof; that the trust company accepted the deed, and took possession of the premises so conveyed to it; that no part of the claim of the City Bank against the Mendenhalls has ever been paid; and that the trust company has not paid the debts of the Mendenhalls, as provided in such agreement, to any amount exceeding $100,000. The complaint prays for a personal judgment against the trust company for the amount of the bank's debt.

1. The first claim made by the trust company in support of its demurrer is:

"The agreement in question created an open trust, and no action at law can be maintained by the cestui que trust, or by any person interested in the...